Andhra’s Excise Policy May Brew Double-Digit Growth For Liquor Brands

We forecast high-single or double-digit sales growth and robust volume growth for liquor companies due to Andhra reforms, a strong wedding season and a soft base, Abneesh Roy & Jainam Gosar, analysts at Nuvama Insitutional Equities, wrote in a research note

Bengaluru: Recent excise policy of Andhra Pradesh government will help established liquor brands gain market share, supplementing their growth performance in the coming quarters. According to brokerage firms, policy measures by the Andhra Pradesh government will help liquor companies clock nearly double digit growth rates in coming quarters.

Strong wedding season and base effect will also play a role in such volume growth, analysts pointed out.

“We forecast high-single or double-digit sales growth and robust volume growth for liquor companies due to Andhra reforms, a strong wedding season and a soft base,” analysts-Abneesh Roy & Jainam Gosar of Nuvama Insitutional Equities wrote in a research note on Q3 results preview.

“The Andhra government’s new liquor policy shall lead to market share gains for large established players,” the paper noted.

In October last year, Andhra Pradesh government notified the new excise policy, allowing private retailers to sell liquor. This was aimed at battling shrinking liquor revenue and maintaining funds in the exchequer to materialise the six welfare schemes which Chief Minister Chandrababu Naidu had announced the earlier.

The new excise policy was also aimed at checking the flow of illegal liquor trade in the state, which had led to revenue losses to the exchequer.

According to observers, the new policy will generate approximately Rs30,000 crore annually for the State.

Apart from AP’s favourable policy, a strong wedding season will also benefit the liquor companies in the third quarter of ongoing financial year.

“The increase in the number of weddings boosted demand for premium spirits and liquors benefitting companies such as United Spirits and United Breweries,” Nuvama’s note pointed out.

According to sources in the know, sales of premium liquor brands have maintained their momentum in the third quarter. India has seen demand for premium brands rising in the alcoholic beverage space in recent years as per capita income of citizen grows.

“We reckon premiums shall perform well, with growth likely to reach high-double digit YoY (year-on-year). Hence, from an overall demand perspective, we remain positive on the alco-beverage industry given the premiumisation trend shall pick up leading to improved volumes and realisations,” the research note said.

According to reports, India’s rising affluent class is enabling a surge in high-end spirits sales, with Scotch whisky and fine wines registering double-digit growth. Notably, such consumption has outpaced consumption rates in the US and China.